South Island oil suggestion downplayed

HAMISH RUTHERFORD

Last updated 15:35 24/06/2014

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Energy and Resources Minister Simon Bridges appears to have jumped the gun in saying South Island oil production was "reasonably likely", with the company he referred to saying it was some way off a decision.

This morning Bridges played up the interest in New Zealand as a place to explore for oil and gas, in light of a Canadian company relinquishing two permits at Wairoa and Castlepoint on the east coast of the North Island.

"There's actually if you look at it some strong interest and some encouraging signs on onshore petroleum," Bridges told reporters in Parliament.

"Although it wasn't picked up particularly well, in the last couple of weeks, Mosman, an Australian company, made a discovery in the West Coast of the South Island. Actually that looks reasonably likely to lead to commercial production."

Bridges said if Mosman did begin commercial production, it would be the first commercial production of oil in New Zealand outside of the Taranaki region.

But Mosman executive chairman John Barr said the company was only just starting to appraise the results of drilling.

Asked what probability he put on the company pushing ahead to commercial production, Barr said he could not answer.

"We're not there yet. We're not at the stage of economic assessment."

Mosman holds a 143.4 square kilometre exploration permit on the south eastern corner of the Kotuku oil seeps near Greymouth, which it says are the largest natural oil seeps in New Zealand. Wells were first drilled in the area searching for oil more than a century ago.

On June 13 Mosman, which is headquartered in Perth but has its shares listed on London's Aim market, informed New Zealand Petroleum and Minerals that it had made a discovery in its well in the Eight Mile formation, then made an announcement to investors on June 16.

In the following days its shares tripled, although they have since lost most of the gains.

Overnight the company said in a statement that it now planned to drill up to six more wells on the West Coast this year.

"The Oil Discovery in the Eight Mile formation means the exploration phase has been successful and signals the start of the appraisal phase," the company said, adding that it would work to try to establish how large the discovery was.

Last week chairman John Barr told the Greymouth Star that it was "too early to tell" whether the discovery would warrant commercial production.

New Zealand Energy Corporation, the Canadian oil and gas explorer, is giving up its permits to explore Castlepoint and Wairoa on the East Coast of the North Island.

Chief executive John Proust said the company was focused on its Taranaki permits and its East Cape permit.

He said the company's exploration in the Castlepoint and Wairoa permits had given it technical information that would help it elsewhere.

"NZEC's community engagement activities have allowed the company to build strong relationships with regulators, landowners and iwi communities in the East Coast basin," he said.

"We look forward to continuing to build those relationships as we undertake exploration activities on the East Cape permit."

In late 2012, Brazilian group Petrobras handed back its East Coast permits, while United States giant Anadarko's $300 million drilling campaign was seen as a flop and may prompt the company to revise its drilling plans.